Some of the biggest investment checks in biotech are going to startups focused on treating extremely tiny groups of patients. You can see the story playing out at a little company in Novato, CA, called Ultragenyx Pharmaceutical.

The company, founded by former BioMarin Pharmaceuticals executive Emil Kakkis in April 2010, is announcing today it has raised a whopping $75 million in a Series B equity financing. The deal is a so-called “crossover” investment that includes firms that typically avoid biotech startups, and invest strictly in public companies. Adage Capital Partners led the round, and it was joined by mutual funds and separate accounts advised by T. Rowe Price Associates, Jennison Associates (on behalf of clients), and funds managed by subsidiaries of BlackRock, Sanofi-Genzyme Bioventures, Shire, and other unnamed public market investors. Previous investors TPG Biotech, Fidelity Biosciences, HealthCap and Pappas Ventures also joined in the expansion round.

The money is enough to run the company through 2015, and could help put it into a strong bargaining position to go public in 2014 once it has gathered data from its first pivotal clinical trial, says Shalini Sharp, Ultragenyx’s chief financial officer. Ultragenyx, after a little more than two years in business, has now raked in a total of $120 million in its two institutional financing rounds.

Much of that money is going to help fight a condition few people have ever heard of — hereditary inclusion body myopathy (HIBM) — that affects an estimated 2,000 people worldwide. While diseases this rare may never have showed up on pharma company radar screens in the past, they do now. Diseases like cancer, diabetes, and heart disease may have once looked like the most promising markets for pharmaceutical companies, but there are now compelling business reasons to think about small patient populations instead. Companies like Genzyme, BioMarin, Alexion Pharmaceuticals and others have shown that big, enduring monopoly or duopoly businesses can be built on making effective, super-expensive treatments for tiny groups of patients. The FDA has tended to look kindly on novel treatments for people with rare diseases, and so have insurers, at a time when there’s been a lot of pushback against companies developing incremental, and costly, advances for more common conditions.

Ultragenyx enters that favorable environment with a few more factors in its factor, including a CEO in Kakkis with a long track record of developing FDA-approved treatments at BioMarin (NASDAQ: BMRN). The company has 27 employees, including a few folks with experience just down the road in Novato at BioMarin.

“The team here is very experienced, specifically in rare and orphan disease drug development, including people from BioMarin and Genzyme,” Sharp says. “Real rare disease companies understand the intricacies of development when you have limited information to work with and limited patient populations.”

The lead drug in development at the new company is UX001, an oral tablet being developed for hereditary inclusion body myopathy, also sometimes called GNE myopathy. This is a progressive muscle-wasting disorder that usually starts in young adulthood, and progressively disables people over a 10 to 20-year period. There is no effective treatment for the disease, and researchers believe that it can be treated effectively by replacing some of the sialic acid that these patients lack.

Ultragenyx in-licensed its lead compound from Japan-based Nobel Pharma in 2011, filed an application to start clinical trials in the U.S., and has already completed a Phase I clinical trial of the drug, Sharp says. That trial suggested the drug was safe at about a 6,000 milligram daily dose, which came in the form of four pills taken three times a day, Sharp says.

That may sound like a heavy pill burden for patients, but Sharp notes that the tablets are “coated, vitamin-size pills,” and that the company didn’t get any complaints from patients in the trial. Ultragenyx has also completed enrollment in a mid-stage clinical trial which will give it a sense of how well the drug works. The 45-patient trial, which is randomly assigning patients to the new drug or a placebo, is designed to answer whether the drug is working as desired at both the molecular and clinical level. Researchers are taking biopsy samples to see if the drug is acting the way it’s supposed to in the muscles, and physicians will be testing patients on real-life outcomes that matter to patients, like muscle strength in 10 different muscle groups, and walking ability.

Ultragenyx has a couple of more drug candidates it has in-licensed to build up an internal pipeline. One is an enzyme replacement therapy for mucopolysaccharidosis type 7 (MPS-7), in-licensed from Saint Louis University, slated to enter clinical trials in 2013. The company also has a third compound in its pipeline, but it isn’t yet saying where it’s from, or what it’s for, Sharp says.

With the new money in hand, and a growing slate of clinical development work, Ultragenyx plans to do some hiring, Sharp says. The company currently has 27 employees.

Luke Timmerman is the National Biotech Editor of Xconomy.

SOURCE: http://www.xconomy.com/san-francisco/2012/12/20/ultragenyx-led-by-biomarin-vet-snags-75m-for-ultra-rare-diseases/?single_page=true